BioCryst Pharmaceuticals, Inc. (BCRX) Earnings Call Transcript & Summary

Good day, and welcome to the BioCryst Pharmaceuticals Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nick Wilder with BioCryst. Please go ahead.

Good morning, and welcome to BioCryst's conference call to discuss its proposed acquisition of Astria Therapeutics. Participating with me today are CEO, Jon Stonehouse; President and Chief Commercial Officer, Charlie Gayer; and Chief Financial Officer, Babar Ghias. A press release and slide presentation about today's news are available on our Investor Relations website. Today's conference call will contain forward-looking statements, including statements related to the proposed transaction, including financial estimates and statements as to the expected timing, completion and effects of the transaction. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. For additional information, including a detailed discussion of these risks, please refer to Slides 2 and 3 of the presentation. I'd now like to turn the call over to Jon Stonehouse.

Thanks, Nick. We are very excited to announce the acquisition of Astria today. This strategic move will be the source of the next product to market for BioCryst that supports our strategy in several ways. Let me start by reminding you of the growth pillars of our strategy, so you understand where the deal fits. The first pillar is we have a highly profitable growing product in ORLADEYO, that is on its way to $1 billion at peak around the end of the decade and IP protection out to 2040. ORLADEYO is the source of double-digit revenue growth for the next few years before we bring other products to market. The other two pillars are intended to answer so what comes after ORLADEYO. The sources for this are our discovery engine and business development. In both cases, we're focused on rare disease assets as we've built a highly effective commercial engine and supporting infrastructure to drive ORLADEYO growth. This will be leveraged to support and drive growth and profit for future rare disease products. So, the next products to fulfill this strategy are from our discovery team, we are currently developing BCX17725, a promising early-stage compound to address patients living with Netherton syndrome. And today, with the announcement of the acquisition of Astria, we are adding a late-stage compound for patients with HAE, Navenibart to our pipeline. We believe Navenibart is a perfect fit next product for our company, and Charlie and Babar will explain why. With that, I'll pass the call to Charlie.

Thanks, Jon. We have watched Astria with great interest for several years, because we knew they were developing something special. So, this is a very exciting day for us. Beyond what this transaction means for BioCryst, we believe it will mean even more for patients. BioCryst started engaging with the HAE community over a decade ago, when we began our first oral therapy development program. What we learned then and have continued to learn over the many years is how important it is for patients to have treatment options that meet their needs. With ORLADEYO, it was the promise of a safe and effective targeted oral therapy to prevent attacks. And we are grateful to the patient community, because we would not have succeeded without their support and encouragement. ORLADEYO continues to grow as expected. We had another strong quarter for demand in Q3, in line with what we have seen over the past 2 years with no impact from new competition. This tells us what we already know from our deep market insight work. Patients only switch therapy if another option satisfies an unmet need in a meaningful way. We believe Navenibart is a potentially transformative therapy that will meet the needs of many patients, particularly those who are already on injectable prophylaxis therapy. There's about 5,000 HAE patients in the United States alone. The potential for Navenibart to be transformative is especially true for patients on TAKHZYRO, the current market leader. TAKHZYRO is a very effective drug. And TAKHZYRO and ORLADEYO have established a kallikrein inhibition as the standard for HAE prophylaxis. But roughly 70% to 80% of patients on TAKHZYRO require injections every 2 weeks based on real-world data presented by the manufacturer. A sizable proportion of patients are willing to treat that way despite a high rate of injection pain, because the treatment controls their attacks. But what if they could control their attacks with similar efficacy with an injection that doesn't hurt and do it 2x to 4x per year instead of 24x or even 12x per year. Low dosing frequency is the main remaining unmet need identified by HAE patients and their physicians. And they see every 3-month dosing as the tipping point that would motivate a switch. That is the potential of Navenibart. The opportunity to bring this potentially best-in-class product to patients is incredibly exciting for us. We believe our team at BioCryst is second to none in terms of commercial execution in the rare disease and HAE space. Our team has deep HAE experience. We have the ability to use real-time customer data. We have the ability to market directly to thousands of HAE patients and HAE treaters. This experience and expertise will allow us to accelerate the launch curve for Navenibart and help the greatest number of patients even as ORLADEYO reaches and maintains peak revenue of $1 billion. With the two products together, we believe our HAE portfolio could drive double-digit annual revenue growth that will reach at least $1.8 billion by 2033. I'll turn it over to Babar to describe this transaction in more detail and how it will be transformative for BioCryst.

Thanks, Charlie. On our last earnings call, right after we announced the sale of our European business, we emphasized the role of BD as one of our key growth pillars, which Jon described earlier. We shared that this growth would come from both HAE and non-HAE opportunities as our plan is to be a rare disease consolidator. We said that the first deal needs to make very clear strategic sense. And while finding the right opportunity can take some time, I am thrilled that our first transaction checks all the strategic boxes and timing could not be more perfect. ORLADEYO continues to deliver strong performance and with a steady-state cost structure, every dollar of growth is now contributing significantly to our operating profitability and cash flow generation. With the addition of Navenibart to our portfolio upon closing of the transaction, we will be poised to deliver double-digit growth upon potential approval and more impressively, on a significantly larger revenue base. We expect very minimal incremental SG&A investment required to commercialize Navenibart, as we have put in place already one of the best commercial engines in the rare disease space. That low investment, combined with accelerated revenue is expected to supercharge our earnings growth well into the next decade. Let me comment on the near-term financial impact of the acquisition. We have shared with you that with the closing of the sale of our European business, our cost structure will be simplified and our operating profitability on a stand-alone basis is expected to significantly improve. So, even after absorbing the R&D development spend of Navenibart, we will remain highly profitable on a non-GAAP basis and cash flow positive. We expect the first full year of revenue after Navenibart's anticipated launch, we will be significantly accretive to operating profit. We will guide to the relevant combined numbers post closing of the transaction, which is expected in Q1 of 2026. We will be financing this acquisition with a mix of BioCryst equity issued to Astria shareholders to enable them to participate in the upside here and the remainder with cash. With the sale of our European business, we have retired the remaining Pharmakon debt of approximately $200 million. To finance this new acquisition, we have entered into a strategic financing partnership with Blackstone at a highly attractive cost of capital with access to up to $400 million of cash for this transaction. Due to our continued growth behind ORLADEYO and improving cash flow profile, we anticipate to achieve over $1 billion of cash on hand by 2029. Our plan is to continue our strategy of becoming a rare disease consolidator and the partnership with Blackstone provides us with further access to capital. This acquisition timing is perfect as we are hitting so many critical milestones for the business. But most importantly, I'm excited about what this means for the patients. We are uniquely positioned to continue the growth of ORLADEYO and accelerate the vision of Navenibart, meeting the needs of patients with multiple therapeutic options. We will now open the call for Q&A.

[Operator Instructions] The first question today comes from Jessica Fye with JPMorgan. The next question comes from Stacy Ku with TD Cowen.

Congratulations on this announcement. So first, just curious because we've been getting some investor feedback and questions. There is some precedence with Shire's acquisition of Dyax. But just comment maybe high level, your level of confidence, what you all are putting together, maybe the differences between oral and injectable in the market space and, let's say, separation there as we think about the Q1 closing. So, that's the first question. And then, when it comes to the competitive landscape, can you just maybe talk about what work the team did when it comes to both public and private companies in the HAE prophylaxis space and how you went in on Navenibart? So that's the second, especially as we think about maybe some of the private companies that are coming along. And then the last question is, maybe on Navenibart development. Do you expect early '27? And we understand this is still early days, but just given your relationships and assuming Q1 closing, do you expect early '27 will be conservative timing for results?

Yes. Let me take the first one, then Charlie, you can take the next two. So, the first one regarding precedent in the space of companies having more than one product like Takeda now, yes, there's more than one CSL as well. And so, there's definitely tons of precedent, and there's tons of competitors in the space. So, we think -- and Charlie said in his prepared remarks, these complement each other really well, and there's plenty of patients that still seek injectables that we think are an opportunity for us. Charlie?

Thanks, Jon. Yes. And what I'll add to the oral versus injectable as well is that, patients tend to have a very clear preference based on where they are. So, brand-new patients to prophy really prefer oral. Patients who are already doing well on an injectable would prefer to have an injectable that even better meets their needs, specifically with dosing. And so, that's where we think that this makes a lot of sense. As far as the landscape for competition, as I mentioned in my prepared remarks, the real tipping point for patients on injectable therapy today that would make them switch is every 3-month dosing or better. And we think that Navenibart with a known profile with that potential for 3- to even 6-month dosing, and the fact that they're off to a good start with their clinical program gives this product a first-mover advantage. And so, as we've looked at other products, we think that Navenibart is likely to be the first one to launch with that profile. And then, -- sorry, Stacy, I forgot your last question.

The last one was topline data in early '27.

Topline. Yes. So we think that, again, Astria has got a very strong team. They're doing all the right things. So, early 2027 data will be great. Of course, when we're able to complete this transaction, we have a lot of experience as well, and we'll do whatever we can to keep that timeline or improve it if we can.

And Stacy, the last thing I'd say on your second question is, this is a sticky market, as you very well know. And that first-mover advantage, if you've got patients that are well controlled with really convenient dosing, they're not going to switch to something that has similar dosing.

Okay. Wonderful. Well, congratulations. We obviously done a lot of work in the HAE space and also really like Astria. So, thanks.

The next question comes from Laura Chico with Wedbush Securities.

Congrats on the deal. I'm not sure who to direct the question to Jon, Babar. But could you talk a little bit more about the downstream revenue opportunity for Navenibart and kind of how you're building your assumptions there and the market opportunity and just kind of the overall peak assumptions? And then secondly, could you share any color on whether this was a competitive process?

So, yes. I think on the revenue, as we have shared with you, ORLADEYO continues its trend to be a $1 billion product. Naturally, we have a very high level of confidence on the Navenibart product. And so at this point, we're not sharing any projections. But what I can share with you very confidently is beyond -- Navenibart starts to hit our profile right when the growth for ORLADEYO comes to a steady state. So, that enables us to basically build on to that double-digit growth and well into the next decade. So, I think we are very confident that with the machinery that we have put in place, we will absolutely deliver on that double-digit growth.

And on the second question around competitive process, the proxy will go out from Astria, and you'll know the details of the process.

The next question comes from Steven Seedhouse with Cantor.

Congratulations on the proposed deal. Two questions. One is, I guess, I'm interested or maybe even surprised that you're not planning to develop the OX40 antibody that you're getting from Astria here as well. Is that because it doesn't fit in the sort of orphan disease strategic focus? Or is there something else to say there? And then also, I would ask you to sort of expand your comments on just appetite for additional deals after this? Where does this leave you in terms of what you're thinking about in terms of being acquisitive going forward?

Yes. So I'll take the first one, and Babar will take the second. On OX40, we think it's a really interesting product, but it's not rare disease, and it's better in the hands of somebody that's in that area. So, that's the reason, that's the rationale. So you're correct. Babar?

Yes. So, I think, we've done a very transformative major acquisition. So, our first plan is to make sure that we make Navenibart the priority, and integrate this acquisition well. But naturally speaking, ORLADEYO will continue to put points on the board. And as we said that, while we anticipate that by 2029, we'll have $1 billion cash balance, we are not going to sit on that. So, our plan, once we've integrated, once we made sure Navenibart is on its way to potential enrollment success as it continues to do, we will be looking at other opportunities as well.

Yes. And I think -- listen, I've been in BioCryst for almost 19 years. This team just showed you that they have an appetite for this, and we'll continue to do this.

The next question comes from Brian Abrahams with RBC Capital Markets.

Congrats on the deal. Just commercially speaking, what are some of the different considerations that to take into account for marketing a long-acting injectable in the space? It sounds like there's going to be limited additional SG&A spend, but I'm just curious how that might adjust and where you might be making the commercial investments. And then just secondarily, it sounds like most patients are on TAKHZYRO every 2 weeks and every 3-month dosing could be a tipping point, but HAE is also, can be a sticky market. So, I guess I'm curious what your market research tells you could be the potential conversion of patients from current to future long-acting injectables and maybe the types of patients who would switch?

Charlie, do you want to take those?

Sure, Brian. So as far as the different considerations, clearly, as we've laid out, the patients have strong preferences one way or another based on where they are in the market. And so, that will be a big part of our marketing campaign. I think, another really important part is getting patients access to therapy. And we've built, what we think is also a second to none program with helping patients with patient services and market access. We've done a great job with ORLADEYO, and we would expect to do a great job with Navenibart given our services and the profile of the product. And as far as additional investments, we have -- we continue to believe we have the sales force that is the right size out there. We've got a great marketing team. There'll be incremental investments as we continue to grow with ORLADEYO on the patient services and market access side. But there really don't need to be huge investments. We -- one thing we do, do also very well is develop real-world evidence around our product, and we would expect to do that in the future with Navenibart. It's been an important part of our ORLADEYO story. It will be an important part of Navenibart as well in the future.

I mean, here's a simple exercise for those of you that cover Astria as well as you take our model with the growth of SG&A that you have planned and you take the revenue from Navenibart and you take the development cost for Navenibart, and that's it. And run that model.

The next question comes from Jon Wolleben with Citizens.

Congrats on the transaction. Wondering if you could talk a little bit about the confidence you have around Astria's early data set being relatively small in open label and what you anticipate to see in a Phase III profile? And if you think these impressive efficacy rates will stand up? Or is this going to be the longer duration driving adoption or if it's going to be a competitive profile. So, just if you could talk a little bit about what you want to see in a target product profile coming out of a Phase III trial?

Yes. Thanks, Jon. We're very impressed with the early data from Astria. And if you recall, going back to lanadelumab in the early days. Lanadelumab also showed very impressive early data in a Phase Ib study. So, there's a real analogue to what Astria shows. The difference being, of course, Navenibart has the 3- to 6-month dosing and greater than 90% attack reduction across both doses is very impressive to us. So, where we think the need for efficacy in the market is largely met across the board. For some patients, if they don't get efficacy on one product, they have other options, which is great for patients and they move. But the market isn't looking for more efficacy. What it's looking for is less burdensome dosing. And that's what Navenibart has the potential to provide with every 3- to 6-month dosing. And what we've seen in our market research again is that, that 3-month profile with very low to no injection site pain is really something that gets patients' attention and we think is a tipping point to what will make them switch.

And Charlie, the projections you guys gave out today, is that assuming just that every 3-month works or that the 6-month works as well? Or is that an upside scenario to what you guys are thinking about?

No, it's really a blend of both, but 3 months alone is the really significant thing. 6 months is just icing on the cake.

The next question comes from Gena Wang with Barclays.

Also congrats on the deal. So, maybe two questions regarding -- one is, what will be additional clinical trial cost before the data readout in early 2027? And the second, when I look at the Phase III trial design, they do have three cohorts that was a placebo. So, total trial size is relatively small. Maybe if you can share a little bit of thoughts on the trial design. Is that any cohort positive approved or three cohorts versus placebo to be positive and that will claim positive outcome? So if you can share a little bit more color on the ALPHA orbit clinical trial design and maybe some assumption behind it?

Babar, do you want to take the first one on the cost, and Charlie, you take the trial design.

Yes. So, Gena, thanks for the question. So we have not -- we will not be naturally giving guidance as to the projections of the spend right now, because the transaction is still pending approvals. Once the transaction closes, we will be back and revise our operating guidance for 2026 when we are ready to do so. Having said that, as I said before as well, that with the divestiture of the European business, our stand-alone business is going to deliver strong operating profit growth. And even when we add the development spend, when we will guide you at the right time, you'll see our profitability will remain quite strong. So, maybe I'll hand it to Charlie for the second question.

Sure. We think that the Astria team has been really smart in how they've designed this trial given the precedence in the HAE space, but also given the newness of every 3- to 6-month dosing. So based on the likely efficacy of this product, we think that all three cohorts are likely to show statistical significance. The key is just getting them all enrolled, and we think that the Astria team is off to a really good start on this.

The next question comes from Maurice Raycroft with Jefferies.

Congrats on the update. Maybe just a follow-up to just how you're thinking about the $1.8 billion assumptions there. In the past, you showed a Monte Carlo simulation with some projections for Navenibart, and it seems higher today. So, just what's changed since then for your projections? And how do you view the future breakdown in market share for both ORLADEYO and Navenibart?

Yes. So just to clarify, we are not giving projections on Navenibart. As we highlighted, that is based on a Wall Street consensus average number. But as we have said repeatedly that we feel very confident that ORLADEYO is on its path to $1 billion product. And with respect to the projections, yes, you're right. We do a highly, highly comprehensive market survey in terms of all the products and things. But I think, it's important to note what it does not tell you is the execution risk for some of these products. And that's where I think people underappreciate how difficult it is to commercialize a rare disease product and particularly in a space where there are many incumbents. And we have repeatedly shown that. We continue to show that. So, that is why, I think, we feel so confident in terms of hitting that double-digit revenue growth on a going-forward basis when Navenibart -- when ORLADEYO starts to become a steady-state product.

And I'd just add to Babar's point about execution is, if this deal goes through, we have the better part of 3 years to prepare for the execution, and our team is ready for that.

Yes. Honestly, I would argue that there's no better team to launch this drug than BioCryst, right, with the experience that we've had with ORLADEYO.

The next question comes from Serge Belanger with Needham & Co.

This is John on for Serge today. Congrats on the acquisition. I just wanted to double-click on the commercial dynamics between ORLADEYO and Navenibart, that is if Navenibart is approved. Would you expect any potential pressure to ORLADEYO considering the improvements in dosing and the levels of efficacy that Navenibart could provide even considering the stickiness between the market segments? And then second, quickly, if you could provide any color on the IP landscape for Navenibart right now, that would be great.

Sure. Thanks, John. On the first question, with any pressure between the two, what we've shown repeatedly and described repeatedly is that, when patients start ORLADEYO, 60% of them make it to a year, because they're doing really well and very few of them drop off after that. So, we expect that dynamic to continue. We think the great opportunity potentially with Navenibart is those other 40% may choose to move over to an every 3- or 6-month dosing with Navenibart. So, we don't expect pressure on ORLADEYO. We expect that the two products can offer patients what they need in an oral or in an injectable setting. And as far as the IP landscape, we're very comfortable with their IP out to 2042.

And that was a key component in the diligence process.

The next question comes from Jessica Fye with JPMorgan.

Can you speak to your confidence that the FTC will be comfortable with this transaction?

Yes. We have no reason to believe that we won't be successful with the regulators, and there's tons of competitors in the market currently, and there's more coming. So very confident. Sorry, we lost you there, by the way.

This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks.

So, let me wrap up with this. We've been saying for a while that BD is a key component to our strategy. And as Babar said earlier, we've also been saying that the first deal needs to make a lot of sense. And so, good fit, high probability of success, right timing in terms of gap filler with our pipeline and then driving revenue growth into the next decade. And today, I believe we've announced a deal that checks all those boxes. So as always, thank you for your interest in BioCryst. We look forward to continuing to keep you updated. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.